(Yicai Global) July 13 -- The amount of foreign bonds issued by Chinese real estate companies in the first half plummeted 91.1 percent from the same period last year, after a string of high-profile defaults erode overseas investor confidence, Securities Daily reported today, citing data from the China Index Academy.

Chinese developers raised CNY16.9 billion from the sale of offshore bonds in the six months ended June 30, the report said. No new foreign bonds were issued at all in February and May. And the total raised from non-bank financial institutions slumped 56.5 percent in the first half year on year to CNY482.5 billion (USD71.8 billion), it added.

The overall financing environment for the real estate industry did not improve much in the first six months, said Chen Xiao, a senior analyst at Zhuge Housing Data Research Center. Investors remain cautious and developers are under liquidity pressure. It remains difficult for most private developers to raise funds.

Supply chain-based asset-backed security finance and credit bonds, though, were popular, accounting for 29.9 percent of the total financing scale in the first half at CNY144.4 billion (USD21.4 billion), a gain of 7.8 percentage points from the same period last year, according to the China Index Academy.

Market confidence will recover gradually as sales improve, said Chen Xing, deputy research director at the enterprise division of China Index Academy. Supportive policies will help foster a better financing environment in the second half, but it will take some time. Those property companies under great debt pressure and with tight cash flows are still at risk of default.

Real estate companies are mainly seeking financing at home, said Yan Yuejin, research director of think tank E-House China Research and Development Institute. Those that can need to adjust their fundraising teams as soon as possible to make efforts in financing sectors with supportive policies, he added.

The year's second debt repayment peak in July and August has arrived, said Chen Xing. Real estate firms with fair asset quality and short-term liquidity pressures should communicate with creditors in advance if they need to postpone repayment, so as to avoid cross defaulting.

Developers usually propose to pay extra fees and increase coupon rates to persuade creditors, Chen Xing added. Although this relieves the short-term pressure it leads to a heavier interest burden and does not ease long-term debt pressure.

Editor: Kim Taylor